Pt 2: Turkish Lira → gold & BTC volatility
As per previous post, the lira (USDTRY) has been getting hammered in an ongoing currency crisis through mismanaged gov & monetary policy, souring US relations, and COVID hitting the country’s tourism industry. President Erdogan, who has been directly calling the shots at CBRT (Turk cent bank), despises the prospect of raising rates, despite the need to put a floor under the currency amidst a >20% inflation rate eroding the Turkish citizen’s purchasing power quickly. Further monetary mismanagement from their shift to embracing/aggressively accumulating gold reserves has Turkey now exceeding Russia as the largest buyers of gold (hence contributing to gold recent ↑ through record highs) - instead of using their dwindling FX reserves to buy gold at ATH, they “should” be defending the lira, which is now at all time record lows vs the dollar and euro.
Along with its pro-gold/anti-dollar (due to sanctions) stance, Turkey has also been aggressively embracing crypto and digital currencies over the past year, with 2020 CBDC rollout. Crypto trading has greatly expanded in Turkey, companies like Binance expanding their local footprint.
How this relates to gold and BTC this past week & going forward:
•First just to preface: In a recent post shortly BEFORE TSLA Q2 earnings, I had called for TSLA results to be the top for the stock regardless of what they announce (good or bad, net profit/loss), as well as the catalyst to re-start a BTC rally, as the retail driven focus and flows move from one bubble to the next (“one bubble at a time.”)
Within 2-3 hours of TSLA Q2 results and investor conference call, BTC jumps +5% kicking off the current rally. May be coincidental (sure doesn’t seem to be), but BTC which until that moment had been trading dead flat, suddenly sprinting to life matches in timing with my call - as opposed to all other commentators citing “central bank printing,” “dollar ↓,” “gold & silver ↑,” and even the halving from months ago. ALL of those things are fundamental reasons for BTC to go up, ALL of those things had BEEN going on (some, like printing fiat, have been going on for over a decade), and NONE of those explain why the markets suddenly decided that was the time to price it in - and therefore are nonsense zero value attempts at explaining.
•With that said, I’ve also repeated countless times that the spark catalyst (for both BTC, gold and silver) doesn’t necessarily equal the sustaining driver for upside, in fact that would be highly unlikely. The initial price jump is almost irrelevant, because there are who knows how many hundreds of billions if not more with their fingers on the trigger ready to get long BTC, and to a lesser extent gold and silver, all of them know the fundamental case, and they just need that initial price move confirmation before deploying their capital. So TSLA was the lit match, but the room is already soaked with gasoline - and when fully ablaze, the long-charred matchstick will barely be an afterthought.
•Therefore, if Turkey’s ongoing currency crisis (which really began in 2018) is rapidly deteriorating while BTC looks to show SOME signs of life, those who hold lira will jump ship and shift their assets to something, anything, that won’t destroy the value of their liquid assets like the lira has been.
Look at the chart- BTCUSD and BTCTRY (along with BTCJPY, BTCEUR etc) have all moved pretty much in tandem % for %, with little spread between BTC and the different fiat pairs. But in the last week, not only is BTC at record highs vs the lira (certainly not vs $ € ¥ £ etc), but the performance spread between BTCTRY and BTCUSD have become notably wide - by double digit % diff within a few days. This is obviously a reflection of dollar vs lira, but shows just how much flows are moving from lira to BTC vs other fiat. It also explains a lot of BTC’s recent post-resurgence pullbacks - Lira volatility with flows in/out based on developments from Ankara.
•Gold on the other hand has been on a consistent nonstop surge, until yesterday- as my chart posting from yesterday points out that the gold rally will stall due to the lira sell off reversal. And indeed that seems to be how the day played out. If Turk CB has been the largest buyer of gold though July, then that means they are selling lira (and fx reserves) to buy gold = gold ↑, lira ↓. If reports are true that CBRT reserves are running out, then that means no more inflows to gold from a major contributor to the rally (gold loses upside steam and sellers take hold pushing prices ↓ for healthy correction), and no more lira selling (“no more” as in a slowdown in rate of change terms).
So therefore, my view was/is that if the lira starts to reverse and appreciate (USD/TRY ↓), gold will follow. That seems to have happened, and seems to be what finally caused the gold rally to pull back.
That’s why my last post was saying: keep an eye on the lira, for both BTC and gold near term directionality.
Going forward:
Gold and BTC will resume their ascend in the immediate - med term, because of much larger forces than the lira. But thinning bullish volumes towards the top of the gold and silver rally + thin volumes in general for crypto make their price action susceptible to a major EM currency like the lira in crisis.
Personally I’m remaining long Gold untouched and just bought (very cheap) puts ahead of the downward move yesterday, which I’ll liquidate and use to add to gold as I keep eyes on Turkey.
I took down 25% BTC exposure (25% figure comes from my % gain since getting massively long ahead of TSLA earnings), and plan to redeploy back into BTC. I DO NOT recommend shorting either gold or BTC, as the lira situation can re-reverse in a heartbeat, and/or the (absolutely clueless) bulls will just come in and buy the dip.
What started as a TSLA spark has been picked up by Turkish lira holding citizens, obviously in addition to global individuals re-entry to BTC (in dollars, yen, euros, pounds etc). However, it hasn’t been enough of a move to pull in the institutions yet- though it’s still early in the BTC next phase rally, and this is why BTC upside isn’t yet a one directional decisive surge.
Along with its pro-gold/anti-dollar (due to sanctions) stance, Turkey has also been aggressively embracing crypto and digital currencies over the past year, with 2020 CBDC rollout. Crypto trading has greatly expanded in Turkey, companies like Binance expanding their local footprint.
How this relates to gold and BTC this past week & going forward:
•First just to preface: In a recent post shortly BEFORE TSLA Q2 earnings, I had called for TSLA results to be the top for the stock regardless of what they announce (good or bad, net profit/loss), as well as the catalyst to re-start a BTC rally, as the retail driven focus and flows move from one bubble to the next (“one bubble at a time.”)
Within 2-3 hours of TSLA Q2 results and investor conference call, BTC jumps +5% kicking off the current rally. May be coincidental (sure doesn’t seem to be), but BTC which until that moment had been trading dead flat, suddenly sprinting to life matches in timing with my call - as opposed to all other commentators citing “central bank printing,” “dollar ↓,” “gold & silver ↑,” and even the halving from months ago. ALL of those things are fundamental reasons for BTC to go up, ALL of those things had BEEN going on (some, like printing fiat, have been going on for over a decade), and NONE of those explain why the markets suddenly decided that was the time to price it in - and therefore are nonsense zero value attempts at explaining.
•With that said, I’ve also repeated countless times that the spark catalyst (for both BTC, gold and silver) doesn’t necessarily equal the sustaining driver for upside, in fact that would be highly unlikely. The initial price jump is almost irrelevant, because there are who knows how many hundreds of billions if not more with their fingers on the trigger ready to get long BTC, and to a lesser extent gold and silver, all of them know the fundamental case, and they just need that initial price move confirmation before deploying their capital. So TSLA was the lit match, but the room is already soaked with gasoline - and when fully ablaze, the long-charred matchstick will barely be an afterthought.
•Therefore, if Turkey’s ongoing currency crisis (which really began in 2018) is rapidly deteriorating while BTC looks to show SOME signs of life, those who hold lira will jump ship and shift their assets to something, anything, that won’t destroy the value of their liquid assets like the lira has been.
Look at the chart- BTCUSD and BTCTRY (along with BTCJPY, BTCEUR etc) have all moved pretty much in tandem % for %, with little spread between BTC and the different fiat pairs. But in the last week, not only is BTC at record highs vs the lira (certainly not vs $ € ¥ £ etc), but the performance spread between BTCTRY and BTCUSD have become notably wide - by double digit % diff within a few days. This is obviously a reflection of dollar vs lira, but shows just how much flows are moving from lira to BTC vs other fiat. It also explains a lot of BTC’s recent post-resurgence pullbacks - Lira volatility with flows in/out based on developments from Ankara.
•Gold on the other hand has been on a consistent nonstop surge, until yesterday- as my chart posting from yesterday points out that the gold rally will stall due to the lira sell off reversal. And indeed that seems to be how the day played out. If Turk CB has been the largest buyer of gold though July, then that means they are selling lira (and fx reserves) to buy gold = gold ↑, lira ↓. If reports are true that CBRT reserves are running out, then that means no more inflows to gold from a major contributor to the rally (gold loses upside steam and sellers take hold pushing prices ↓ for healthy correction), and no more lira selling (“no more” as in a slowdown in rate of change terms).
So therefore, my view was/is that if the lira starts to reverse and appreciate (USD/TRY ↓), gold will follow. That seems to have happened, and seems to be what finally caused the gold rally to pull back.
That’s why my last post was saying: keep an eye on the lira, for both BTC and gold near term directionality.
Going forward:
Gold and BTC will resume their ascend in the immediate - med term, because of much larger forces than the lira. But thinning bullish volumes towards the top of the gold and silver rally + thin volumes in general for crypto make their price action susceptible to a major EM currency like the lira in crisis.
Personally I’m remaining long Gold untouched and just bought (very cheap) puts ahead of the downward move yesterday, which I’ll liquidate and use to add to gold as I keep eyes on Turkey.
I took down 25% BTC exposure (25% figure comes from my % gain since getting massively long ahead of TSLA earnings), and plan to redeploy back into BTC. I DO NOT recommend shorting either gold or BTC, as the lira situation can re-reverse in a heartbeat, and/or the (absolutely clueless) bulls will just come in and buy the dip.
What started as a TSLA spark has been picked up by Turkish lira holding citizens, obviously in addition to global individuals re-entry to BTC (in dollars, yen, euros, pounds etc). However, it hasn’t been enough of a move to pull in the institutions yet- though it’s still early in the BTC next phase rally, and this is why BTC upside isn’t yet a one directional decisive surge.
